Goliath Versus David

This post is syndicated at The Motley Fool Network: http://beta.fool.com/malayappan/2012/12/21/goliath-versus-david/19574/

In my other post, Goliath Versus Goliath, I told you that one man’s Goliath is another one’s David (from the Biblical story).  Guess who won?  David, of course!  David was a diminutive but clever boy who went up against a terrifying giant with nothing more than a bag full of pebbles. How did he win?  He did something radical – he chose NOT to play by Goliath’s rules.  In other words, he chose NOT to use a sword and armor and instead used a sling and pebbles, something that Goliath wasn’t used to.  It was something that other warriors were not used to either.  Therein lay David’s secret to success!

Apple Versus Google

In case you were wondering, the wait is over!  Google (NASDAQ: GOOG) is Apple’s(NASDAQ: AAPL) David and the analogy while it might appear far-fetched, is appropriate and I will explain why.  One might conclude that both Apple and Google are Goliath’s and they are rightly so in their own spheres of influence.  Google is the King of search and Apple is the King of media.  Everything that Apple does is to try and enhance the consumer’s media experience and their products line up that way.  Consider their latest renewed foray into televisions.  There is a rumor that they are testing high definition television set designs.  In my humble opinion, Apple is rapidly entering what I would consider “commodity territory.”  Are they running out of ideas?  However, Apple currently has nearly complete dominance in the media enablement domain with their wide range of products – iPads, iPods, iPhones and such that all revolve around the iTunes ecosystem.  It would be daunting for another player to try to duplicate this amazingly efficient enterprise.

Until now that is!  Enter Google with their smart ploy of giving away for free their Android operating system.  According to Google,

“We wanted to make sure that there was no central point of failure, so that no industry player can restrict or control the innovations of any other. That's why we created Android, and made its source code open.” 

Anyone can download and use this software, including you and me!  A host of hardware manufacturers ranging from Samsung to Acer, Asus, Toshiba and Amazon (NASDAQ:AMZN) purvey phones and tablets that are powered by Android.  Google also acquired Motorola Mobility this year, in a move that is bound to further cement Android’s snowball like growing influence.  It’s a virtual bonanza out there for the discerning consumer who is thirsting for choices and the range of offerings is only going to get better and better.

From Google’s standpoint, they win in multiple ways.  First, by giving away the software, they are massively popularizing and promoting it.  This creates familiarity for the consumer and eases the transition into newer versions of Android.  Secondly, by now having the ability to control the design of their own line of mobile devices with the purchase of Motorola mobility, they have positioned themselves nicely.  Finally, by enabling a wide range of manufacturers and application makers, they have created an ecosystem that caters to a consumer market withdiverse needs and budgets.  In the end, despite the seemingly altruistic intentions, Google benefits and wins by developing a growing user base that is already hooked on to their search, map and email products and receptive to a pitch for a seamless experience across a broader spectrum.  It is indeed a win-win strategy for Google.

Other Warriors

While the Goliath of an Apple will no doubt be fending off the multi-pronged attack from a host of manufacturers that benefit from participating in the Android ecosystem, there are other warriors chomping at the bit.  Microsoft (NASDAQ: MSFT) hopes to offer a compelling alternative with their Surface tablet, which however benefited little from their recent multibillion dollar campaign.  They made a commendable effort that unfortunately had lackluster results just as I had predicted in my post about the Windows 8 launch.  However, Microsoft is still a competitor that can put some dents in Apple’s armor.  This just increases the visibility of choices in the eyes of the consumer who is starting to realize that there are choices out there.  Even if Apple’s products appear to have the edge thanks to the enormous popularity of their iTunes ecosystem and their status as bleeding edge innovators, the party cannot continue forever.  There is bound to be rapid, exponential evolution in the mobile marketplace and for now it appears that Google has positioned itself to win.     

The Future of Goliath and David

Google is definitely a solid long term growth play although it will be another couple of years before they unseat Apple’s currently predominant position in the smartphone and tablet space.  Apple is likely to remain appealing in the short term horizon, but it is unlikely that their meteoric rise is sustainable in the long run.  For now, they enjoy the advantage of having complete control over their ecosystem with their masterful execution, but the likes of Samsung are sure to catch up soon.  That is if they get their marketing messages right (starting by reducing product confusion).